Exercise 5-16 (Algorithmic) (LO. 3)On January 1 of the current year, Rhondell Corporation has accumulated E & P of $114,000. Current E & P for the year is $342,000, earnedevenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabethsells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $182,400 ($91,200 toElizabeth and $91,200 to Jonathan) on April 30 and a total of $319,200 ($159,600 to Jonathan and $159,600 Marshall) on December 31.Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in theirstock for any amount that is treated as return of capital.If an amount is zero, enter "0". If required, round any division to two decimal places and use in subsequent computations.Round final answers to the nearest dollar.April 30 distribution of $182,400From CurrentE & PFrom AccumulatedE & PTreated asReturn of Capital124,363.64 X58,036.36 X0December 31 distribution of $319,200 $ 217,636.36 X $55,963.64 XFeedbackCheck My Work45,600Accumulated E & P is the total of all previous years' current E & P (since February 28, 1913) reduced by distributions made from E & P in previousyears. It is important to distinguish between current E & P and accumulated E & P because the taxability of corporate distributions depends onhow these two accounts are allocated to each distribution made during the year.

It is the measure of a company’s ability to pay dividends to its shareholders. The current year’s…

On January 1 of the current year, Rhondell Corporation has accumulated E & P of $114,000. Current E & P for the year is $342,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $182,400 ($91,200 to Elizabeth and $91,200 to Jonathan) on April 30 and a total of $319,200 ($159,600 to Jonathan and $159,600 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital.

On January 1 of the current year, Rhondell Corporation has accumulated E & P of $114,000. Current E & P for the year is $342,000, earned evenly throughout the year. Elizabeth and Jonathan are sole equal shareholders of Rhondell from January 1 to April 30. On May 1, Elizabeth sells all of her stock to Marshall. Rhondell makes two distributions to shareholders during the year: a total of $182,400 ($91,200 to Elizabeth and $91,200 to Jonathan) on April 30 and a total of $319,200 ($159,600 to Jonathan and $159,600 Marshall) on December 31. Determine the allocation of the distributions by completing the table below. Assume that the shareholders have sufficient basis in their stock for any amount that is treated as return of capital.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Deli Corporation (an S Corporation) is owned 100% by individual A. Deli earns business income of $40,000 in year one and distributes $30,000 to A in December of year one. What is A’s basis in the X stock at December 31 assuming A’s initial basis was $10,000?
Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders who each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all of Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338 (Hint: Determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P) (Negative amount should be indicated with a minus sign.) Current E&P Less dividends paid Undistributed Current E&P Prorated Undistributed Current E&P at 9/30 Add Accumulated E&P at the beginning of year Total Accumulated E&P at 9/30 Reduce Accumulated E&P by Add current E&P in 4th quarter Accumulated E&P at beginning of next year $ 0
Baskin purchased 24,000 common shares (15%) of Robbin on January 1, Year 5, for $293,000 and classified the investment as FVTPL. Robbin reported net income of $103,000 in Year 5 and $108,000 in Year 6, and paid dividends of $58,000 in each year. Robbin's shares were trading at $16 per share on December 31, Year 5, and January 1, Year 6. On January 1, Year 6, Baskin obtained significant influence over the operating, investing, and financing decisions of Robbin when the controlling shareholder sold some shares in the open market and lost control over Robbin. Accordingly, the investment in Robbin was reclassified to an investment in associate. On December 31, Year 6, Baskin sold its investment in Robbin for $17 per share. Required: Prepare all journal entries for Years 5 and 6 related to Baskin's investment in Robbin. Date January 1, Year 5 December 31, Year 5 December 31, Year 5 Date December 31, Year 6 December 31, Year 6 December 31, Year 6 General Journal Investment in Robbin Cash…
After several years of profitable operations, Javell, the sole shareholder of JBD Inc., a C corporation, sold 22 percent of her JBD stock to ZNO Inc., a C corporation in a similar industry. During the current year JBD reports $2,300,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZNO’s tax rate on the dividend income (after considering the DRD) ZNO’s tax on dividend ZNO’s tax rate on dividend income %
after several years of profitable operations, Javell, the sole shareholder of JBD Incorporated, a C corporation, sold 22 percent of her JBD stock to ZNO Incorporated, a C corporation in a similar industry. During the current year, JBD reports $2,900,000 of after-tax income. JBD distributes all of its after-tax earnings to its two shareholders in proportion to their shareholdings. How much tax will ZNO pay on the dividend it receives from JBD? What is ZENO's tax rate on the dividend income? 1. ZNO's tax on dividend received? 2. ZNO's tax rate on dividend income?
ABC was formed as a calendar-year S corporation with Alan, Brenda, and Conner as equal shareholders. On May 1, 2020, ABC's S election was terminated after Conner sold his ABC shares (one-third of all shares) to his solely owned C corporation, Conner, Incorporated ABC reported business income for 2020 as follows: (Assume that there are 365 days in the year.) Period Income January 1 through April 30 (120 days) $ 203,285 May 1 through December 31 (245 days) 533,285 January 1 through December 31 $ 736,570 If ABC uses the daily method of allocating income between the S corporation short tax year (January 1–April 30) and the C corporation short tax year (May 1–December 31), how much income will it report on its S corporation short tax year return and its C corporation short tax year return for 2020? Essay Toolbar navigation opens in a dialog
Bedrock Incorporated is owned equally by Barney and his wife Betty, each of whom holds 840 shares in the company. Betty wants to reduce her ownership in the company, and it was decided that the company will redeem 420 of her shares for $25, 400 per share on December 31 of this year. Betty's tax basis in each share is $7, 200. Bedrock has current E&P of $ 10, 580,000, and accumulated E&P was $50, 780,000 at the beginning of the year. a. What is the amount and character (capital gain or dividend) recognized by Betty as a result of the stock redemption, assuming only the "substantially disproportionate with respect to the shareholder" test is applied? b. Given your answer to part (a), what is Betty's income tax basis in the remaining 420 shares she owns in the company? c. By what amount does Bedrock reduce its E&P because of the redemption? d. Can Betty argue that the redemption is "not essentially equivalent to a dividend" and should be treated as an exchange?
Hawkeye Company reports current E&P of $300,000 this year and accumulated E&P at the beginning of the year of $200,000. Hawkeye distributed $400,000 to its sole shareholder, Ray Kinsella, on December 31 of this year. Ray's tax basis in his Hawkeye stock before the distribution is $75,000. b. What is Ray's tax basis in his Hawkeye stock after the distribution? Tax basis
Jack, the sole shareholder of Rettig Corporation, sold his stock to Jill on July 1 of this year for $80,000. Jack's stock basis at the beginning of the year was $50,000. Rettig made a $20,000 cash distribution to Jack immediately before the sale, while Jill received a $40,000 cash distribution from Rettig on November 1. As of the beginning of the current year, Rettig had $12,000 in accumulated E & P, while current E & P (before distributions) was $15,000. What is the character of Jack's distribution (amount of dividend, return of capital, capital gain)? What is the character of Jill's distribution (amount of dividend, return of capital, capital gain)? What is Jack's recognized gain on the sale of his stock?
JEM owns 30% of MOCK's share capital. During the year to 31 December 2011, MOCK sold inventories at transfer price of $2,000,000 to JEM, of which 40% were still held in inventory of JEM at the year end. MOCK applies a mark-up of 25% on all goods sold. MOCK reported a net profit of $500,000 for year ended 31 December 2011. MOCK is JEM's only associate. What is share of associate's net profit after tax in JEM's consolidated profit or loss statement for year ended 31 December 2011? PLEASE PROVIDE EXPLAINTION. A) $150,000 B) $102,000 C) $38,000 D) $97,000 E) None of the above.
On July 1, 2021, Tony and Suzie organize their new company as a corporation, Great Adventures Inc. The articles of incorporation state that the corporation will sell 37,000 shares of common stock for $1 each. Each share of stock represents a unit of ownership. Tony and Suzie will act as co-presidents of the company. The following transactions occur from July 1 through December 31. Jul. 1 Sell $18,500 of common stock to Suzie. Jul. 1 Sell $18,500 of common stock to Tony. Jul. 1 Purchase a one-year insurance policy for $4,920 ($410 per month) to cover injuries to participants during outdoor clinics. Jul. 2 Pay legal fees of $1,900 associated with incorporation. Jul. 4 Purchase office supplies of $1,700 on account. Jul. 7 Pay for advertising of $280 to a local newspaper for an upcoming mountain biking clinic to be held on July 15. Attendees will be charged $50 on the day of the clinic. Jul. 8 Purchase 10 mountain bikes, paying $19,500 cash.…
On January 1, 2023, Kinney, Inc., an S corporation, reports $33,600 of accumulated E & P and a balance of $84,000 in AAA. Kinney has two shareholders, Erin and Frank, each of whom owns 500 shares of Kinney's stock. Kinney's nonseparately stated ordinary income for the year is $42,000. Kinney distributes $50,400 to each shareholder on July 1, and it distributes another $25,200 to each shareholder on December 21. How are the shareholders taxed on the distributions? Ignore the 20% QBI deduction. Do not round intermediate computations. If required, round your final answers to the nearest dollar. Erin and Frank each report $ dividend income for the July 1 distribution and $ distribution. Assuming that the shareholders have sufficient basis in their stock, Erin and Frank each receive a tax-free distribution from AAA. $ each for the December 21